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Korean investors have purchased nearly 1 trillion won ($7.5 million) worth of dividend-focused exchange-traded funds (ETFs) comprised solely of U.S. companies. The figure is more than four times the amount invested in domestic dividend ETFs.
According to data from market tracker FnGuide, Friday, retail investors here purchased a total of 935 billion won worth of ETFs tracking the Dow Jones U.S. Dividend 100 Index from Samsung Asset Management, Mirae Asset Global Investments, Shinhan Asset Management, and Korea Investment Management this year.
These ETFs are the Korean counterparts to the well-known SCHD ETF (Schwab U.S. Dividend Equity ETF).
In contrast, retail investors net purchased only 206.6 billion won worth of 14 domestic dividend ETF products during the same period.
Analysts noted that investors favoring dividend investments are directing substantial funds into U.S. ETFs rather than Korean ones, due to a perception that U.S. shareholder returns are more reliable.
In addition to stable dividends, U.S. dividend stocks offer the potential for capital gains from stock price increases. For instance, the stock price of Lockheed Martin, which has the largest weighting in the U.S. ETFs, has nearly quadrupled over the past decade.
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Other factors attracting Korean investors is the fact that, unlike Korea, where high-dividend stocks are mostly concentrated in the financial and securities sectors, U.S. ETFs offer the advantage of diversification across various sectors such as defense, biotechnology and food.
"There is a clear trend of preferring U.S.-centric investments, not only for capital gains, but also for dividend-related ETFs," an official in the asset management industry said.
"This trend has led to intensifying competition for U.S.-focused ETFs."
The growing popularity of U.S. ETFs is challenging the Korean government's Corporate Value-up Program, which aims to encourage local listed firms to enhance their capacities. Launched in late February, this initiative is part of efforts to address the so-called Korea discount, where Korean shares are sold at prices lower than their fundamentals.
The government has urged businesses to increase dividends to improve shareholder returns as part of the value-up initiative, but progress has been slow. Of the approximately 2,500 listed companies in the country, only 17 have announced value-up plans so far.